The Indian power sector had reached the absolute dead-end by the 1980s. The total losses of the SEBs without subsidy had crossed Rs. 3000 crore. There was little hope of any cure unless some drastic measures were taken. The sector was facing peaking shortages in various parts of the country and severe financial burden was imposed on the State Governments because of the performance of the SEBs.
In 1989, the World Bank had stated that request from the electricity sector from developing countries added up to $100 billion and only about $20 billion was available from multilateral sources. The message was that not much of funding would be available from the World Bank. Furthermore, there were no surpluses left within the sector for investment purposes.
However, nothing really happened till 1991 when the existing electricity laws were amended to provide for private participation in generation. Specifically, the Electricity Laws (Amendment) Act of 1991 was enacted to encourage the entry of privately owned generators. The change in policy coincided with the fact that India was facing its worst ever balance-of-payments crisis and was on the verge of defaulting which would have reduced India’s bond rating in international credit markets. Read More…
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